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Monday, Apr. 21, 2014

Introducing Charles Ponzi

Posted Monday, October 24, 2011, at 10:11 AM

"Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million Americans will increase 3.6 percent in 2012. The 3.6 percent cost-of-living adjustment (COLA) will begin with benefits that nearly 55 million Social Security beneficiaries receive in January 2012." (www.ssa.gov)

What is commonly called a "Ponzi Scheme" is defined as "A fraudulent investing scam that promises high rates of return at little risk to investors. The scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors." The Ponzi scheme is named after Charles Ponzi, a clerk in Boston who in 1919, was the first American known to have orchestrated such a scheme.

Recently, one of those seeking the Republican Party nomination to be President stated the obvious: Social Security as it was constructed and exists is a Ponzi scheme. To make such a statement is politically foolish -- we who depend on our monthly stipend from Uncle Sam do not want to hear such things. To call it a Ponzi is, of course, true; but to make such a statement is politically foolish.

The great myth, which is repeated by various Political Action Committees, is that this is somehow something I have "earned." Therefore, it is something to which I am entitled, something that is and always has been and always should be.

As someone receiving and needing the money, allow me certain suggestions:

First, knowing we can't solve a problem if in denial, let's all admit it's a Ponzi scheme. Absolutely no one wants to hear this; which of Bennie Madoff's clients wanted to admit they'd believed a lie? Truth is, I am living on what you poor suckers still working pay into the pot.

Any annuity company in America would be indicted if they took money and lent it at the lowest possible interest to someone they knew would squander it -- with only the promise of being paid back from some future dupe. Would there be no suspicion if, when "profits" were known to be down, an increase in the payout was announced? In addition, does any state Insurance Commissioner tolerate those who died along the way getting nothing of their investment returned?

Social Security is neither a dictate of the Constitution nor imbedded in anyone's Holy script. It is merely a creation of Congress, pushed through on compromises offending the fewest. If some younger generation ever realizes what Social Security is, they can well elect representatives with the guts to put an end to the thing before anyone gets hurt. For my part I'm just glad young people don't, you know, actually vote.

Second, anything above what I paid into it is profit to me.

I myself started receiving "benefits" at the earliest possible age, 63 in my case. What was taken out of my paychecks over 30-plus years has now been returned; anything above this is profit. Such profit from any other annuity I might have purchased with after-tax income would be taxable. Once our investment is repaid, why should Social Security not be taxable income?

Finally, what we've got here is a failure to communicate that the whole thing was supposed to be a social supplement and not an absolute right. President Franklin Roosevelt wanted to help old folk in distress, and give them excuse for retiring -- opening up Depression era jobs for younger men.

Depending on age and income, some Social Security payments can be reduced by so-called "earned" income (i.e., from a job). Payments are never reduced at any age based on other, so-called "unearned" income [interest, dividends, other retirement income]. Is this what Roosevelt was trying to do when he pushed through what was essentially a "jobs" bill? Live long and prosper Social Security recipient.

Charles Ponzi, where are you when we need you?



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